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VAT: Understanding the Origin, Journey, Issues

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By Joseph Chibueze, Abuja

But for the intervention of the Appeal Court which ordered the warring parties to maintain status quo, the Rivers and Lagos state governments would have by now be collecting value added tax (VAT) in their states.

However, that order by the court is only postponing the dooms day for

the Federal Inland Revenue Service (FIRS) which had earlier lost two court cases as it tries to maintain control over the collection of VAT across the country.

As at the time of filing this report more states including Benue, Akwa

Ibom, Ogun and Edo are already dusting their papers preparatory to

enacting their own value added tax laws.

It all started when the Rivers State government approached a Federal

High Court in Port Harcourt asking the court to determine if it was

constitutional for federal government through FIRS to be collecting

VAT in the state.

Based on the prayers of Rivers State, the presiding judge, Justice

Stephen Pam declared that the Federal Inland Revenue Service (FIRS)

“has no constitutional authority to enforce and administer taxes not

expressly stipulated under Items 58 and 59, Part I, Second Schedule to

the 1999 Constitution of the Federal Republic of Nigeria.”

Following that court decision, Rivers State House of Assembly passed a

bill to enact the State Value Added Tax (VAT) Law No. 4 of 2021. The

state governor, Mr. Nyesom Wike signed it into law on August 20, to

end the authority of the FIRS to administer, collect and enforce the

Value Added Tax Act, 2007 in Rivers State.

That singular act by the Rivers State Governor has also motivated

Lagos State government to enact and sign its own value added tax (VAT)

law.

The major argument is that there is gross injustice in the

distribution of VAT proceeds by the federal government.

According to Rivers State Governor, Nyesom Wike, in the month of June

2021, over N15 billion was collected as VAT from the state, but its

share of it was a little over N4 billion whereas a state like Kano

which within the same month generated N2.8 billion, got exactly the

same amount as its own share of VAT proceeds.

On several occasions, people have argued that it was wrong for states

that prohibit the consumption of some goods to share in the VAT

revenue accruing from the same goods they have prohibited.

On August 24, 1993, precisely three days to the end of his regime, the

Federal Military Government under Gen. Ibrahim Babangida (rtd)

promulgated the Value Added Tax Decree No. 102 of 1993. But the decree

did not become effective until December 1, 1993 under the late Gen. Sani Abacha.

At the time of its promulgation, the Babangida regime recognised that the VAT enforcement authority lied solely with the federating units.

But the regime, by fiat, designated the FIRS as the enforcement authority on the grounds that the federating units lacked the capacity to collect VAT within their defined jurisdictions.

With the advent of the 1999 Constitution, consistent with Section 315 of the Constitution, all the decrees, which fall directly within the purview of the federal government, became the Acts of the National Assembly.

In specific terms, the section states: “Subject to the provisions of this Constitution, an existing law shall have effect with such modifications as may be necessary to bring it into conformity with the provisions of this Constitution and shall be deemed to be an Act of the National Assembly to the extent that it is a law with respect to any matter on which the National Assembly is empowered by this Constitution to make laws …”

On this ground, the Value Added Tax Decree No. 102 of 1993 became Value Added Tax Act, 1993, retaining five per cent as the chargeable rate in 1996 under the Federal Military Government.

Under the Obasanjo administration, however, the VAT Act, 1993 was amended twice, first in

2004 and also at the twilight of the administration in 2007.

Like Babangida, Obasanjo assented to the VAT Act, 2007 about four days to the expiration of his administration. Under the VAT Act, 2007, the chargeable rate of VAT was increased from five per cent to 10 per cent.

 However, the amendment stoked public disapproval, which compelled the late President Umaru Musa Yar’Adua’s administration to reverse it to five per cent on September 25, 2007.

The Federal High Court in Port Harcourt was to determine whether the Value Added Tax Decree No. 102 of 1993 be an Act of National Assembly?

Or should the National Assembly legislate on value added tax or consumption related taxes with emphasis on which level of government has the power to collect VAT within the ambit of the constitution.

Section 4 of the 1999 Constitution has defined the legislative powers of the National Assembly and States’ Houses of Assembly. Under Part I,

Second Schedule, the constitution recognises 68 items, on which the National Assembly can make laws for the purpose of good governance at the federal level.

Specifically, Items 58 and 59 on the Second Schedule further defined the taxing authority of the federal government. As these provisions suggest, the National Assembly cannot exercise its powers beyond legislating on matters on relating to stamp duties as shown on Item 58; taxation of incomes, profits and capital gains as indicated on

Item 59.

Also, under Part II, Second Schedule, the 1999 Constitution lists 30 items on which the state Houses of Assembly can legislate. Likewise, the National Assembly can as well legislate on any item or matter

under the Concurrent Legislative List. It is on these grounds that the

Federal High Court declared that there “is no constitutional provision

which grants the National Assembly power to make the VAT Act.”

Beyond this issue of who collects VAT and who does not, is the fact

that Nigeria is gradually inching towards true federalism, a state

many Nigerians have been yearning for.

The fact remains that time has come when politicians and particularly,

state governments should begin to stand up and challenge legislations

they do not feel comfortable with.

The debate over restructuring of the Nigerian federation to make it a

truly federal state has been persisted since the return to democratic

rule in 1999. The arguments had culminated in three different attempts

to restructure the country’s federal structure.

In 2005, Obasanjo convened the National Political Reforms Conference

in response to popular demands then. Also, former President Goodluck

Jonathan convoked National Conference in 2014 under the late Justice

Idris Kutigi to address imbalance and injustice that characterised the

federal system.

In keeping with its campaign promises, the ruling All Progressives

Congress (APC), in 2018, set up a Committee on True Federalism to

devolve more powers to the federating units. The committee was chaired

by the Kaduna State Governor, Nasir el-Rufai.

None of these attempts made any significant change in the country’s

governance structure. Since 1999 some states of the federation,

especially Lagos State and recently Rivers State, have successfully

challenged the constitutional powers of the federal government in

areas of conflicting interest.

With the current VAT imbroglio, and the recent court action instituted

by the 36 states of the federation through their Attorneys-General

asking the Supreme Court to compel the federal government to remit

funds generated from stamp duties into state accounts, it appears the

states are waking up to their responsibilities.

Commenting on the latest development in the match towards true

federalism, an economist and former Director General Lagos Chamber of

Commerce and Industry, Dr. Muda Yusuf, said all arms and levels of

government have a responsibility to uphold the constitution.

“This is what they have all sworn to do,” he said. “It is interesting

that the sub nationals are getting bolder and more assertive.  We are

beginning to see some flavour of federalism in governance.  It is a

good development.”

The Yoruba socio-cultural group, Afenifere, in a statement by its

National Publicity Secretary, Jare Ajayi, noted that the rulings by

Justice Stephen Dalyop Pam of the Federal High Court, Port Harcourt on

August 9 and on September 6, have earned the judiciary in Nigeria

respect as an institution that is not only capable of ensuring justice

but is actually working on deepening federalism in the country.

The group urged state governments to use the opportunity provided by

the landmark judgments on VAT to explore other areas that the

Constitution empowered them to assert themselves as federalists.

“In other words, they should step up actions that will liberate the

states from the stronghold of the federal government that has turned

Nigeria into a Unitary State – in contradistinction to the federal

spirit prescribes by the Constitution,” the statement said.

“They should rest assured of Afenifere support as they give vent to

power devolution and entrenchment of true federalism in Nigeria.

“Areas in which the states need to assert themselves include

agriculture, health, education, electricity, physical planning, title

registration, registration and production of vehicle number plates and

casino licensing etc as Lagos State Government did in the past.

For President of the Institute of Chartered Secretaries and

Administrators of Nigeria (ICSAN), Gbenga Owokalade, “It is beyond the

fact of winning a court case. It is a function of what is the import

of that judgement on the Nigerian nation. Several times people have

talked about physical federalism and all of those things and there

have been arguments here and there but the judgement is speaking to

the heart of some of these issues. Why will you collect resources from

an area and that area does not enjoy the bulk of that thing and then

you share out? The states need to sustain the push towards true

federalism.”

Business News

DBN Signs $61m Credit Deal With AfDB, Unveils Support Initiative Report

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By Tony Obiechina, Abuja

The Development Bank of Nigeria Plc (DBN) has launched DAWN: DBN Action for Women in Nigeria, unveiled its Impact Report and presented MSME Data Assets at the seventh edition of Annual Lecture held in Abuja.

DBN, in a statement on Thursday, said while delivering a welcome address, its Managing Director and Chief Executive Officer, Dr Tony Okpanachi, said the central challenge was no longer reforms themselves but ensuring benefits reach businesses at end of the chain.

He asked how to make sure benefits reach traders in Onitsha, fabricator in Aba, farmer in Kebbi and young founder in Yaba, noting that MSMEs accounted  for about half of Nigeria’s GDP and more than eight in every ten jobs, adding that when reform works for MSMEs it works for most Nigerians.

He explained that reform becomes prosperity only when entrepreneurs can act on it whether through long tenor loans to buy equipment, banks willing to take risk or skills and records needed to grow.

He said working through Participating Financial Institutions DBN provides longer term funding, partial credit guarantees through subsidiary Impact Credit Guarantee Limited and capacity building including Entrepreneurship Training Programme.

He disclosed that as at December 2025 DBN had disbursed a cumulative N1.4 trillion to MSMEs through 84 Participating Financial Institutions creating about 1.6 million jobs nationwide.

Under the new five year strategy, the Bank aims to reach more than two million MSMEs with deliberate targets for women led businesses, youth led businesses and underserved states.

On DAWN, Okpanachi said finance alone had not enabled enough women-led businesses to scale.

He said initiative brings together financing, guarantees and credit support, technical assistance, outcome linked grants and market linkages delivered through banks, microfinance institutions, fintechs, aggregators, cooperatives and direct channels.

Its priority sectors are agriculture and exports, healthcare, arts and creatives, technology and green business.

He said DAWN is about moving gender focused lending beyond intention and turning access into opportunity.

On the sidelines of the lecture DBN and African Development Bank held a signing ceremony of AfDB DBN 61 million United States dollars Gender Line of Credit development that reinforces Bank commitment to women led enterprises.

Okpanachi urged Participating Financial Institutions to extend lending into sectors and states where access to finance has been limited, policymakers and regulators to measure reform by what changes for business at end of chain and MSMEs to formalise, keep good records and use support now available.

The Vice President as Special Guest of Honour was represented by Dr Fred Iklaga Senior Technical Adviser in the Office of Special Adviser to the President on Economy.

Keynote speakers were Chief Executive Officer of MTN Nigeria, Dr Karl Toriola, and Chairman of Nigeria Sovereign Investment Authority, Dr Segun Ogunsanya.

Fireside chat featured Chief Executive Officer of Sterling Bank Abubakar Suleiman, manufacturing and trade entrepreneur Mrs Omoyemi Chukwurah and by video Kola Masha of Babban Gona.

The Secretary to the Government of Federation, represented by Augusta Warren Bekaredebo, said 2026 tax reforms would bring relief to many small businesses expressing optimism that a lot of businesses will be smiling by next year because they will be exempted from tax.

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NLC Threatens Nationwide Action as Talks With FG Collapse

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By Tambaya Julius, Abuja 

The Nigeria Labour Congress (NLC) has threatened possible nationwide industrial action following the failure of talks with the Federal Government over workers’ welfare, petrol prices and other outstanding labour demands.

The warning came after a meeting between the government and organised labour at the Ministry of Labour in Abuja on Thursday, October 22, ended without an agreement.

The congress has given the Federal Government until Tuesday, October 27, to make meaningful progress on the issues, warning that its relevant organs would decide the next line of action if the next meeting fails to produce concrete commitments.

The NLC has also directed its affiliates, state councils and civil society allies to begin mobilising members for possible nationwide action.

In a statement issued after the meeting, the NLC Acting General Secretary, Benson Upah, expressed disappointment over what he described as the government delegation’s lack of preparedness for the negotiations.

According to the congress, organised labour presented its demands in good faith but left the meeting without any concrete commitments from the government.

The demands include a reduction in petrol prices to 2024 levels, renegotiation of the national minimum wage, implementation of agreed tax relief measures and resolution of the terms of settlement involving the Joint Health Sector Unions (JOHESU).

The congress also called for the resolution of issues raised by the Joint Public Service Negotiating Council (JPSNC) over peculiar allowances, wage awards and hazard allowances.

The NLC said the government delegation lacked the necessary authority to engage meaningfully on the issues presented by labour representatives.

“The meeting between the Federal Government and organised labour, convened at the Ministry of Labour in Abuja on 22nd October 2026, has ended without resolution,” the statement said.

It added that the Minister of Labour requested that the meeting be adjourned until October 27 to allow the government to prepare adequately for further discussions.

The preparations, according to the statement, would include bringing relevant ministers and heads of departments and agencies to the negotiating table.

The congress said it remained open to dialogue but would not accept continued delays in addressing workers’ concerns.

“We will report back to our organs, and if no meaningful progress is made on Tuesday, the relevant organs of the NLC will decide the next line of action,” it said.

The labour body urged workers and members of the public to remain calm while the negotiations continue, even as it directed its affiliates and allies to prepare for possible industrial action.

“However, we urge all affiliates of NLC and TUC; all state councils and our civil society allies to be alert and start mobilising for a possible action across the nation while we hope that the tenets of our demands are met by the government,” the statement added.

The October 27 meeting is expected to provide another opportunity for both sides to address the outstanding issues and prevent a possible escalation of the dispute.

However, the NLC’s decision to begin mobilisation suggests that tensions could rise if the next round of talks fails to produce meaningful progress.

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Election Campaigns: FRSC Bars Officers from Politicians’ Escort

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The Federal Road Safety Corps (FRSC) has barred its personnel from escorting politicians during campaigns for the 2027 general elections.

Zonal Commanding Officer, RS6, ACM Abimbola Owolabi, gave the directive during her maiden visit to the Cross River Command in Calabar on Wednesday.

Owolabi said patrol vehicles and sirens must not be used for political activities or private engagements, including weddings and funeral processions.

She directed officers deployed to campaign venues to focus exclusively on traffic management to prevent congestion and road crashes.

The zonal head warned personnel against leading political convoys or providing escorts for politicians, stressing that official vehicles must not be used for unauthorised purposes.

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